Vukile Property Fund Limited (VKE) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to our pre-close presentation. [Foreign Language]. We're presenting this morning from Madrid. We're about to start our investor trip through our assets, and the team is all here. So a very warm welcome to you from Madrid for this pre-close presentation. This morning, as always, I'm going to do a bit of an introduction. Itu will then take us through the South African portfolio; Alfonso, the Castellana portfolio, and I'll then end off with the discussion on our capital allocation and guidance. So really, today is the last of our financial year, and we are tremendously excited to present the outcome of what has been a tremendous and a real transformative year. And if we can go to the next slide, please, a tremendous and transformative year for Vukile. A number of things have happened this year. And I think it's worthwhile just stopping and reflecting on what we've done because the group has changed. Number one, we've exited all of our listed exposure. So we sold our remaining stake in Fairvest for ZAR 141 million. We own nothing at the moment. And all of those proceeds have gone into our accretive solar projects. As I think you know, we've done a lot of work in the solar space, and we're getting yields higher than what we sold out in Fairvest. So that's all been accretive. We've spoken a lot about Lar España. We exited that investment. We generated a profit of EUR 82 million. That generated an IRR in excess of 40% for shareholders. And the proceeds of the Lar money, together with the proceeds from our capital raise in September '24, ZAR 1.5 billion, and then also the DRIPs that we issued during the year, which came to around ZAR 800 million, allowed Vukile to really grow the business dramatically this year. So we entered Portugal, initially acquiring 3 assets for EUR 176 million. We then followed that up with a 50% acquisition of Alegro Sintra also in Portugal. So we now have 4 assets in Portugal. A few weeks back, we closed the Bonaire transaction. That's the center in Valencia for EUR 305 million. And when you put all of that together, over the course of this past year, we've grown the asset base in Castellana by around 60% to EUR 1.6 billion, and that's pre updated valuations. So you may see a different number when full year results are out. But you can see tremendous growth in Castellana's direct business. Today, it's 100% direct assets, as is Vukile, 100% direct assets. Very important to highlight that all of the acquisitions that have been made have been fully funded. They're accretive. There is no cash drag. And most importantly, there is no further equity funding requirements, so these are now all in the base, fully funded. And I think in terms of your modeling going forward, certainly, we highlight that they're accretive. I'll talk about the numbers a bit later in the presentation. But again, just to highlight, there's no further equity funding required for these transactions. Operationally, we've had another very strong year. Itu and Alfonso will take you through the detail. Itu in South Africa generated like-for-like NOI growth of 6.4%. And importantly, we see that trending upwards in the year ahead. Castellana generated NOI growth of 2%, and that will also trend upwards. Now remember, that number was held back by some of the value-add projects that are being done during the course of the year. Those are now complete, and you'll see the benefit of those coming through in financial 2026. Just to also clarify that our free float has now increased from 91% to 97%, and that was effective from the 24th of March 2025. Overall, I'm very pleased to confirm our guidance for financial '25 of growth in FFO per share will be between our original guidance of 2% to 4%, and our growth in dividends per share will be 6%. Just to say that all the numbers we're talking about and what we're going to go through now are based on 11 months actual to the end of February and then obviously, our forecast for the month of March, although we're very confident that all the numbers will remain as we are going through them now. So before I hand over to Itu, just to reiterate, confirming guidance for the year, we will achieve our 2% to 4% growth in FFO per share and growth in dividend per share of 6%. Itu, I'd now like to hand over to you, please, to go through the South African numbers.

Brilliant. Thanks, Laurence. Good morning, everyone. It most certainly does give me a great pleasure to present this pre-close update for the SA business for financial year '25. As Laurence has said, the figures that I'll be presenting will be up until the end of Feb. But in essence and directionality, that over the past 31 days, we've seen much of the same as what I'll be presenting. The overall tone of this update, you'll see, is upbeat and positive, driven by continued strong letting performance and increase in the top line, but also significant continued progress on the cost containment strategy that we have. And I'd say in addition to the operational efficiencies that we continue to drive within the portfolio, we've also seen a significant benefit from macro political and economic tailwinds in the SA context. The impact of the GNU successful elections has been positive for business confidence. And also in this current financial year, we had 9 months of no load shedding from -- up until January this year. And then in the second half of the year, we had the two-pot pension fund reform that's also impacted positively on our NOI. So all in all, very strong positive momentum for the portfolio. That's resulted in our NOI growth at 6.4%, which is an increase from the 5.4% that we saw at this point last year. The biggest driver there is cost containment. So we've had additional solar that's been deployed in the portfolio. In fact, in the past 12 months, we would have increased our solar exposure by 64%. So it's been our biggest year of solar rollout since we started the program about 10 years ago. We've also had significant savings in security and cleaning. We retendered those in the past year, so that's flowed through to the bottom line. And because of the positivity around load shedding, we've had significant diesel savings. So that's driven some of the outperformance. From a trading perspective, trading densities have improved from the 2.4% that you see at March 2024. That's increased now to 4.8% and really strong growth across the multiple segments that we have, driven by the township portfolio that grew at 7.8% and our rural portfolio up 4.4%. Our vacancies are in line with where we were at the end of the previous financial year, remained at the low 1.9%. We consider that as pretty much fully let, and it just considers the churn that we have within the portfolio. What doesn't come across in the vacancy number is that we've really improved on the quality of our tenants. We've done circa 20,000 squares worth of deals that we've looked to replace underperforming and driven optimal tenant mix in our malls, particularly in the township and the commuter malls. With vacancies at a segmental level, rural at 0.1%. We've seen an improvement in the urban vacancies, from 1.5% to 1.2%, and the star performer there in the past year has been East Rand Mall. We've seen a complete turnaround of East Rand Mall that's sitting at almost fully let at the moment. And we've also seen a decrease in commuter and overall township vacancies. On the reversionary front, our reversion rate is at 2.3% positive. Our expectation is that in the next 12 months, our reversions should really edge towards aligning with our trading density growth, looking to be above the 4% mark. A good story that's come out in this financial year has been the cost-to-income ratio. Our cost-to-income ratio has decreased from 16.8% to 15.1%. We anticipate that in the year ahead, we'll probably see further improvement there. And that's predominantly due to our solar capacity increasing from 21.6 megawatts peak to 35.5 in the past year. And most of the work that we did was in our KZN and Eastern Cape property. We still have another potential 10 megs that we would look to deploy in the following year, and then we would have exhausted all of our space in our malls. So that's quite positive. We've also seen an improvement in our collection rates. And also, we've seen an environment of lower arrears throughout the portfolio, and this is a product of the positive trade and positive sentiment and the stronger consumer health that we see across all of the segments of the portfolio. So when one looks at the table on the right-hand side, you look at -- you focus on the efficiency measures, you'll see that our rent-to-sales, tenant retention, footfall, contractual escalation all remain in line with prior periods' excellent results. And the portfolio overall, I think, is -- continues to be very well positioned, dominant across all provinces. And we still think that we can sustain the growth that we've shown in this year and also show an improvement into the year ahead. Thanks, Marijke. On to the next slide. So drilling into a bit of the category performance, looking at the detail. So all of our categories are showing growth in trading densities, which really signals a positive trade that we've seen across all of the segments that we have within the portfolio. The grocery category, which is the second biggest category in the portfolio in terms of GLA, saw an improvement from 0.9% to 5.6%. The fashion category, which is one that we've been looking at very closely, has also shown significant improvement from 0.9% to 3.4% in the past year. Our pharmacies category continued to be a top-quartile performer, up 6.1% this year from an already high 7.7% in financial year '24. And if one looks at the second last bullet point on the slides, a couple of categories really performing above inflation: department stores, cell phone, bottle stores, electronics. So really happy that at a category level, we're seeing significant improvement across all of our segments, whether you're looking at rural, township, value centers and even the urban context. So thank you, Marijke, on to the next slide. With regards to footfall and sales, segmental analysis of our trading density really shows growth across all of our segments. And once again, focusing on our township and rural portfolio, you've seen growth in trading densities, turnover as well as footfall. Footfall in the portfolio has grown by 1%, and we've seen this consistently across the industry that footfall is growing at a less measured pace compared to, let's say, our trading densities. So spend per head when people do go to the mall is higher, and they're frequenting our malls slightly less than they did over, let's say, the past 5 years. And then -- so if you look at the customer spend per head in the portfolio, that's increased from ZAR 143 to ZAR 176 per visit. Strong performance that we're seeing around support of our malls in Gauteng as well as the Western Cape, and really proud to see the improvement in East Rand Mall showing a 15.5% increase in footfall. Overall, very happy and comfortable with where our sales have landed as well as our footfall. And even if you compare January last year to January this year, you'll see that from a footfall perspective, our rural portfolio, township, commuter and even our urban portfolio have all shown an increase. Thanks, Marijke, last slide. And then in terms of our leasing activity, so really happy to see that we've had some vibrant leasing activity and strong support from the majority of our top 10 retailers, mostly national tenants. We've done approximately 600 deals within the portfolio, signed over ZAR 1 billion worth of lease values and have done new and renewals, quantum of about 130,000 square meters worth of deals. Although the vacancies look like they're similar to -- they're exactly the same as we were at this point last year, quite a bit of work has happened in the portfolio. We really continue to see strong support, predominantly from our national retailers. And when you focus at our WALE of our renewals as well as our new deals, it's higher than the current portfolio WALE of 3.3 years, which really indicates confidence in the portfolio from our retailers. So to summarize before I hand over to Alfonso, really upbeat and proud of the team for delivering such a strong set of results in a tough operating environment and conditions on the ground, particularly around issues of infrastructure. We anticipate that in the year ahead, we'll continue to make additional traction on our cost-to-income ratio. So that should trend lower. And we think that we'll continue to grow our NOI at a level that will be inflation beating. So really proud of where the portfolio is. With that, I'd like to thank you for your attention and hand over to Alfonso to give us an update on Castellana.

Thank you, Itu. Yes, great, another great year for South Africa definitely. [Foreign Language]. Greetings from Madrid, and thank you for joining us on this pre-close presentation for our FY '25 full year results. As Laurence has explained before, this FY '25 has been a transformative year for Castellana Properties. Including disposals of Mejostilla and Lar España shares, we have closed transactions for a value of almost EUR 800 million, a quite significant amount given the still recovering investment markets in Iberia. We have grown our direct managed assets by circa 60%, implying, of course, a lot of work and pressure to get all done. But however the Castellana team is probably more motivated than ever to keep this path of outstanding growth. Not necessarily adding more assets in the short run as there is enough to digest already, but as we did with our existing portfolio, put the new investments to work properly to extract maximum value for all stakeholders. Let me start the Iberian section with the trading environment in Spain. The Spanish economy keeps leading the European countries in terms of growth. GDP grew 3.2% in 2024, having been revised positively several times during the year. Spain is now definitely in fashion. Surveys to investors from most consultant firms conclude that Spain is the first destination for real estate investment in 2025. Let's see if Mr. Trump finally allows it. If we add all positive metrics such as employment, consumer demand, decreasing interest rates and minimum debt in the form of mortgages on families, all that should keep private expenditure at high levels in the Spanish environment. On top, our most powerful industry, tourism, set a new record with almost 94 million foreign visitors, which kept Spain as the second most-visited country in the world after France. Expenditure of this segment has increased by 16% compared to previous year, giving an outstanding outlook for the country in the near future. Next slide, please. Well, as you know -- as you all know, from this financial year, we are to report on Portugal, as we have successfully entered this market with a lot of strength and excitement. The Portuguese economy is also one of the best performing in Europe now. As Spain, Portugal surprised all economists in 2024, growing above expectations by almost 2%. The Bank of Portugal predicts to grow 2.5% in this 2025, improving last year's growth. The base for it would be very similar to Spanish motives: good employment rates, healthy private consumption and a strong tourist industry growing significantly. Next slide, please. Moving directly to our main metrics. On a like-for-like basis, our Spanish portfolio kept breaking records in number of visitors. It reached 46.5 million visits in 2024. All the excellent work delivered at asset level by our hardworking team is definitely making the difference to the benchmark that we keep beating almost every month. Special mentioned to El Faro and Bahía Sur that have broken the hurdle of 8 million visits in a year, a significant achievement for provincial shopping centers. Also impressive, the 5 million visits of Puerta Europa in a town of only 125,000 people that given its dominance, it obviously has increased its catchment area significantly. When looking at turnovers, our tenant sales have grown 5% in 2024, growing larger now in the retail parks category versus shopping center that have grown 4.1% in the period. Once again, this good performance of footfall and sales, together with other market-leading metrics, such as OCR averages, rent collection rates or vacancy rates, confirm without doubt the strength of the -- our portfolio and its very solid cash flows improving along time, thanks to the active asset management performed at operation levels. On Portugal, looking at the Portuguese metrics, while we see some assets in Portugal that have not yet recovered the pandemic levels, our portfolio there has seen very healthy growth in number of visits, reaching 3% in 2024. Highlights. Loures, which overpassed the 6 million level, growing 5.5% from last year. On sales, growth rates are even better. With an impressive weighted average growth of 6.7% in 2024 versus '23, the shining star again is Loures that has reached 10.2% sales growth in the period. Very good performing metrics that encourages us to keep looking at Portugal as a great market for Castellana to seek opportunities to grow. Next one. Dipping into sales -- next slide, please, yes. Dipping into sales and breaking it down to categories, we also see very impressive growth rates across the board in both countries. In Spain, homeware, fashion and F&B are the most growing. Worth to mention that given those categories are the ones with highest weight in terms of rental income in the portfolio, the fact that they are consistently growing so healthy, it comes with a high expectation of growing rental income for us going forward. Next slide. In Portugal, same story. All category is growing at very healthy levels, and the ones growing most with a high weight in terms of rent in the portfolio. Very good news and outlook for both portfolios. Next slide. Looking at the operating metrics. In Spain, once again, we are keeping market-leading figures in occupancy and rent collection rates for the period. With figures close to 100%, they talk very well on the -- of the know-how and great performance of our teams. And as I always say, it supports very much the portfolio cash flow's sustainability. Very active leasing activity during the period. Up to February, we have transacted 158 leasing deals, divided in 55 renewals with a positive reversion rate of circa 29%. And once again, let me stress that this is excluding CPI as indexations are not normally coincidental of expiries. The most impressive figures come on new leases signed, 103 in the period, pushing rental levels up by almost 30% from the previous existing rent of those units. This clearly proves our historic claim of having an underrented portfolio, which can be improved along time when our team does its magic with relocations, resizings and replacements. Next one, in Portugal, healthy figures so far, given the less intensive management exercise there to date. Still, a 98% occupancy is a full occupancy rate, taking into account structural rotation. We are still working along the former property managers in order to understand better and generally embed knowledge and processes in the management of the portfolio. I am sure that during next year, our team will be able to improve those already good metrics, harvesting the benefits of an internalized management strategy. Good lease activity during this period with 70 leasing transactions, of which 47 renewals have seen positive reversions, and very positive new leasing performance increasing rents by -- in almost 20% of such retenanting performed. So in general, very good performance in both portfolios. That gives us a strong certainty for the closing of this period and a very promising outlook as a start point for an even better FY '26. And with this, I give it back to Laurence to carry out with capital allocation and guidance. Thank you very much for your attention.

Great. Alfonso, thank you very much. And again, I think it's most appropriate for me to thank both you and Itu for your tremendous leadership of the respective teams. The numbers are really fantastic. We're delighted with what your teams have achieved in the past year. So just to have a look at some of the asset allocation. As I said, it's been a transformative year for us. There have been a lot of deals, and we thought it's probably a good idea just to actually go through each of the deals and the numbers to help you. So we started off with our acquisition and entry into Portugal. We acquired an initial 3 assets there for EUR 176.5 million. All these figures I'm quoting are excluding transaction costs. That was at a yield of 9.27%. We've got a 38% LTV on that portfolio of 3 assets, and that should generate a cash-on-cash return in year 1 of 10.3%. We then followed that up with an acquisition of 50% of a center called Alegro Sintra. That was for EUR 44.5 million. That was at a yield of 8%. There's 43% LTV on that asset, and then that will generate a cash-on-cash return of 8.7%. The current 4 Portuguese assets are housed in a vehicle called Caminho. And Castellana owns 70% of Caminho, and our partners, RMB, own the remaining 30%. There is a call option in place for us to acquire that RMB stake really at any time that we choose going forward. Turning to Spain and the big transaction, the 100% acquisition of the Bonaire Shopping Centre, which was closed a couple of weeks ago. That was for EUR 305 million. That was at a purchase yield of 7.2%. We have 40% debt against the asset based on cost, and that will generate a cash-on-cash return of 8.25%. It's important to say there is one more acquisition in Portugal that we expect to close in the next few weeks. Both the debt and the equity funding is already in place for that. And therefore, no need for further funding in that regard. I think really, what this highlights is that the investment team has been exceptional in the past year in finding assets that are yields above where the market is trading. There's no question that the yields in Spain and Portugal have tightened over the last year, probably by about, I'd say, 100 to 150 basis points. And you can see from the yields at which we purchased, they're well ahead of where the market is. And I think that's really a testament to our investment approach. We generally don't get involved in markets and processes where it becomes a competitive bidding process. We've stayed out of those. We are very selective in trying to do off-market deals and finding the right opportunities. And I think this slide highlights what we've been able to do. On the South African front, it seems like a long time ago, but it was still in this financial year. We acquired 50% of Mall of Mthatha. That was BT Ngebs. We've rebranded the mall. Itu and his team have made significant progress in repositioning the mall. Vacancies have gone from, I think, 18% to just under 2%, and we expect to generate a yield in excess of 10% on that asset. So again, a phenomenal piece of work from the team in South Africa. What does this mean? And I think it's very important to highlight those 2 pie charts on the right. At year-end, we expect about 65% of our assets to be based in Iberia and 35% in South Africa. And I think when we talk about a transformative year, you can see what this really means in terms of the whole shape of our business sort of moving more offshore than onshore in terms of size. In the year ahead, we would expect about 60% of our earnings -- of our NOI to be coming from Iberia versus 40% in South Africa. So you can see that sort of really the hard currency nature of our business has really intensified in this past year, and we expect to see those benefits coming through going forward. So turning to the outlook and guidance for the year ahead. As Alfonso said, we've grown the Castellana asset base by nearly 60%. It now accounts for 65% of the group GAV. But it's very important for us to allow time for the team to focus on integration, optimization and crystallizing value from these assets. I think what you've seen over time is the Castellana team's ability to drive value from the assets through better leasing, through value-added projects, et cetera. And all of these assets that we've bought have been bought specifically because we believe there is value to add to them. None of them are what we would call dry assets. They've all got the potential for further growth and expansion. Just as you've seen us grow assets like El Faro, Bahía Sur, Los Arcos, Vallsur, you will see us grow the assets that we've just bought in the years ahead. And I think that's very exciting because that tells you we generally do projects at accretive levels, and that should sort of be sort of a very good runway for growth going forward. But I think the focus now, as I said, is on integration, optimization and starting to crystallize those plans to extract value from the assets. And as such, we're not looking to actively close new deals in Castellana until such time as we're confident that the new assets are fully embedded into our processes. That being said, we're always going to remain open to consider opportunistic deals as and when they're presented. We always remain active in the market, but we're not, at the moment, looking to sort of push the growth dramatically unless something really exciting lands on our desk and we're able to review that. Obviously, that excludes the asset that we're closing in Portugal, but that's a couple of weeks away from finalization. Important then again, and I know I've stressed this point, but there sort of always seems to be that perception that Vukile is looking to raise equity. I want to be very clear. We do not anticipate raising further equity for the time being, either through DRIPs or through bookbuilds. You'll recall that we said we would use DRIPs offensively as opposed to defensively. In other words, where we had an opportunity to deploy money, we would use DRIPs, which is what we did in the past year. We raised about ZAR 800 million through DRIPs -- sorry, if you can go back to the next slide, please. We used about ZAR 800 million of DRIPs in order to grow our investment case. What we won't do is look to use DRIPs in the coming year based on what we're seeing at this stage. So what I'm going to do now is something a bit out of the ordinary. I'm going to give you guidance for FY '26. We normally do that only in June when results come out, but we've just finished our budgeting cycle for FY '26. We've been through our various governance processes, and we're very happy to provide preliminary guidance for FY '26 of growth in both FFO and dividend per share of at least 6%. Now that is based on 2 key assumptions: a euro-ZAR exchange rate of 18.65 and no further interest rate cuts in South Africa, but 2 further euro interest rate cuts in FY '26. Now just to sort of dig into that in a bit more detail. The most important driver in our number is going to be the exchange rate. You'll see at 18.65, it's quite a bit below the current spot level. We have based it on median forecast of the big 5 South African banks, and that is sort of where we have ended up. But obviously, if the exchange rate was higher, in other words, closer to 19, you would expect that growth rate to be figure. So as you're factoring your numbers and building your models for the year ahead, the growth of at least 6% is based on 18.65. I'm sure you're going to have your own different views as to what the exchange rate will be, but it's important for us just to set that out. Because of the very high hedging components in Castellana, the numbers are really not very sensitive to further euro interest rate cuts. So if those cuts don't materialize, we wouldn't see any material impact on our numbers and the guidance that we have put forward. Obviously, we'll confirm tightened-up guidance in mid-June, and that will largely be driven by the exchange rate, but the operational side of the business is clear. We know where those numbers are and very pleased to forecast accelerating growth in the year ahead of at least 6% in both FFO and dividend per share. With that, it comes to the end of our presentation. Very happy to take any questions from the audience.

We have a few questions from the audience, first one from Mweishö Nene at SBG Securities. He says, you've mentioned that you're expecting better NOI for FY '26. I assume this -- I assume a lot of this is driven by cost control, but what are you expecting from turnover/sales growth for FY '26?

Sure. Can I ask Itu to please handle that? It's a largely South African-focused question.

Yes. Thanks, Laurence. Mweishö, the way that we've kind of broken down our view of the top line in the year ahead is, so you've got, let's say, 2/3 of your portfolio that are in contract and growing at, let's say, 6.3%, so that will continue. We think that our reversion should track the current trade, which is 4.8% increase in trading density. So we think that our reversions should get close to that level. So to me, that would form kind of your top line growth. But in addition to that, we think there's -- we've seen quite an increase in alternative income on the billboard side as well as our fiber strategy. So we think that will add to the top line. And then lastly, we've seen quite a bit of turnover rental come through in the past 6 months. We anticipate that, that will continue into the year ahead. So those will be the key drivers. I think the top line sales of 4.8% that we are currently seeing, that should be where our reversionary print should be in the next, let's say, 6 to 12 months. And then you overlay the solar revenue on that. So I mean you can quite quickly see that the top line -- as you know, we're not just focusing on cost containment. There will be growth in the revenue side as well.

Another one from Mweishö. With seemingly higher interest from many parties in Iberian retail, on average, has the pricing for direct assets become too full for future transactions?

Mweishö, that's a very good question. Look, I think, as I said, what we've seen is about a 100- to 150-basis-point tightening of the yields in the last 12 months. And I suppose it doesn't completely close the door on opportunities. We'll always evaluate opportunities relative to our cost of capital. But what it does mean is that our investment approach is even more important. And I think this is what I tried to highlight in the presentation. We're not looking to buy on market. We're looking to buy off market where we can leverage our relationships, leverage our reputation. Being in the market for 8 years, people know us as the most credible buyer in the market in terms of our due diligence processes and how we get things done. So we certainly feel that there will be opportunities, but we don't see ourselves being participants in processes where people are looking to sell and they bring in multiple parties upfront, there's first-round bids, and so you get squeezed on the price going forward. So I think it will continue to be business as usual for us in the sense of always trying to find those pockets of value. But your question is entirely correct. The market has tightened, I think, for, call it, the stock-in-trade deals. I think what we're always trying to do is find the angles, find sort of the opportunities where there's more value add. And really because we've got the team on the ground and we're able to sort of add value through our asset management, we are able to sort of find assets that require work. But when I say that, remember, what we tend to buy assets that are not only dominant, they have already got strong and dominant tenants and cash flows, but where we see upside potential through further expansions, retenanting, better marketing, et cetera. And that is sort of really what this new portfolio looks like. And that's what we're going to continue looking at going forward. So hopefully, that answers your question. Any further questions?

Yes. The next one is from Etienne Roux from Truffle. He says, well done on phenomenal numbers. Could you please elaborate on the Bonaire acquisition yield of 7.25% being much lower than prior deals? What is market yield for this asset? Why were you able to buy it cheaper? What is the asset management opportunity?

Great. Look, I think, in many respects, it's what we just said, it was an opportunistic deal. We saw an angle. I can't elaborate fully on how we were able to get to the asset. But certainly, our reputation of having dealt with Unibail before, our reputation in the market meant that they knew we could close quickly with credible partners, and we do what we say we're going to do. And that got us the exclusivity on the asset. That deal would have closed in about 3 months, had the floods not occurred. And the delay in the transaction was really post the floods for Unibail to then reinstate the asset and get it to where we are. But I think why were we able to get it, it was sort of being deeply plugged into this market, the ability to move quickly and our reputation for closing and being a credible partner. What would that asset trade at today? I would say that from the research, we're seeing prime assets such as Bonaire, probably we've got about 6.25% to 6.50%. So I think we've got an exceptional deal in that particular asset. What do we feel we're able to do? Well, there's about 10,000 square meters of buildability in the asset. I think there are some plans we've already been discussing as to what we could do there. I think there are some, call it, non-GLA income opportunities in the center that can maybe be exploited further as well as some retenanting. Where we are very fortunate is following the floods, most of the tenants on the ground floor have upgraded and -- upgraded their stores to sort of their latest store formats. In fact, we'll be seeing that asset tomorrow on our trip. And I think people are going to be very pleasantly surprised when they see what that looks like and the quality of it. So we believe that there is some very good upside potential in terms of further asset management opportunities. Hopefully, that's covered it. Alfonso, anything else you would add on the asset management at Bonaire?

Not much. I mean you mentioned the 10,000 square meters buildability that is still to be realized and implemented. So we are working now on that project to be properly thought and implemented. So that would be the main thing to be done in the shopping center.

Great. Thank you. Any further questions?

Yes, from Francois Du Toit at Anchor Stockbrokers. He asks regarding cash-on-cash yields quoted for Portugal. Are the numbers net of tax, given the Portuguese assets are not in REIT?

Can I ask Laurence Cohen, please, to take that?

Yes. Thanks, Francois. Yes, the numbers are net of all taxes. The only taxes applicable are actually withholding taxes, which will be at 10%, and the numbers quoted are net of those withholding taxes. The withholding taxes that we eventually play -- pay might be slightly less than 10% because of some asset management fees being charged to an external manager there that we are required to have in Portugal. But I think you can assume all the yields quoted are net of any taxes. And the only taxes applicable, as I said, are those withholding taxes at 10%.

This one is from Suren Naidoo from Moneyweb. What is the expected euro value of the deal yet to be finalized in Portugal? Excluding this property, what percentage of Vukile's assets are offshore?

Suren, excluding the asset, 65% of the assets are offshore. And I'm having a bit of a blank on the number. I think the figure is about EUR 90 million. Laurence, is that correct?

No, it's EUR 68 million.

EUR 68 million, sorry. EUR 68 million is the value of the new asset. But the numbers we've quoted, Suren, the 65% is excluding that asset. And as we hope to close that in the next few weeks.

And then he has a follow-up question, saying, Laurence, since Vukile is not close to opportunities, besides being more internally focused on the year ahead, if a deal comes up, where is it likely to be, Spain or Portugal?

I think we see them as really one in the same market as in it's Castellana, and Castellana will explore opportunities in both of them. So I think I wouldn't put a probability on either Spain or Portugal. We're active in both, and it really is about Castellana's growth as opposed to saying, which country will we prefer over either one.

The next question is from Nick Wilson from News24. He says, you mentioned strong growth of at least 6% dividend per share and funds from operations for FY '26. I take this as a conservative estimate from you saying at least.

Yes. I think, Nick, you read it correctly.

Next one from Chris Reddy at All Weather Capital. Any trends that you can call out for dynamics within SA apparel and food? Who is gaining versus losing market share in your malls? Are there still opportunities to further rejig the makeup of the malls to change the tenant mix?

Itu, would you please take that?

Yes. Yes. Thanks, Laurence. So maybe let me start with the opportunity to rejig. In every -- in any given year, we're probably working on 2 or 3 significant tenant mix -- retenanting exercises. So in the year ahead, we've done a significant retenanting exercise at Phoenix, where we will introduce different categories, spend a bit of money fixing the mall in terms of site lines, increasing GLA. So I would say there's always a handful of those retenanting exercises that we do within the portfolio and targeted at categories that are performing, changing consumer preferences, and in the year ahead, we'll continue doing that. In terms of looking at apparel and maybe the grocery sector and see who's losing and potentially gaining market share, I really want to be careful around sharing too much information here. But one thing that I can share is the lagger in the grocery segment that everyone has been concerned about has shown significant turnaround in the past 12 months, from negative growth to significantly positive. So that's been very encouraging. We're doing a lot of deals with Boxer. So I can comfortably mention that. Very nimble team, quick to do deals, takes smaller footprint, lower TI. Financially, those deals make a lot of sense. So we've got a good relationship with the operations team at Boxer, and we'll continue to support them. And then on the apparel side, I'd say our top 3 fashion retailers showing strong growth in the past 6 months. I would say probably about the same in terms of growth. Maybe on the discount side, you're seeing slightly higher growth in terms of trading stats. And Chris, that's a little bit that I can share. But the sentiment, the momentum, the figures that we're seeing in our top 10 retailers are all positive. There's only one concern, and that's potentially Massmart, and they're working on a strategy in the next 12 months, and we'll keep a close tab on that.

Then another question from Nick Wilson. What is the total asset value of Vukile now? And what could it be with the Portuguese property acquisition?

So I think year-end assets will probably be at around ZAR 50 billion. Obviously, these numbers I'm quoting now are all excluding updated valuations because that process will sort of start in earnest now at year-end, but we expect it to be at around ZAR 50 billion, maybe slightly above that. And again, that excludes the new Portuguese asset, which will close in the next financial year of FY '26, and as Laurence said, that's a EUR 68 million purchase.

The next question from Peter Cromberge from Mergermarket asks, can you speak to Vukile's near-term debt maturity profile and any significant refinancing requirement?

Yes. Laurence, can you take that, please?

Yes, certainly. The maturities coming up in the next financial year are actually very insignificant, very small. I think we've only got 2% of total group debt up for expiry in the coming 12 months. And if I stand to be corrected, but I think it's just a single corporate bond of ZAR 230 million or thereabout that still needs to be refinanced. And then on top of that, we've got ZAR 1 billion of undrawn debt facilities. So in fact, the amount of maturities coming up in the next 12 months is very insignificant.

Another question from Chris Reddy from All Weather Capital. Regarding your guidance for FY '26 of minimum 6% dividend per share growth, what load shedding assumptions are you making?

Itu?

Yes. I mean we generally -- from a Vukile perspective, Chris, we -- the diesel generator is probably the biggest downside on our expense base. And how we communicated generally in our portfolio, the tenants themselves have generated -- we don't have a lot of common area generators. And where we have in the past, we've now centralized that to incorporate battery solutions, and that would be Maluti and also Queenstown. So we're budgeting conservatively around diesel expenses. But in the Vukile portfolio, it's nothing more than ZAR 30 million, ZAR 35 million. So it's not a significant amount that will sway the growth that we've forecasted. So it's not a big concern on our side.

Our next question is from Alistair Anderson at Property Flash. He says, in terms of Iberia, are there plans to expand deeper into Valencia after this? Or are you now dominant in this region? Also, would you look to bring in more tourism-based tenants at your malls on the coast like cruise services, et cetera, or stay with traditional retailers?

So we certainly are the dominant player in Valencia. There are other centers there, obviously, but I think in the node in which Bonaire operates, we are the dominant player. I don't think we have any specific strategy on any region. I think we're always very opportunistic and open to what's there. And once you see the opportunity, you evaluate it in the context of the region. But the other centers that we know of in the area, I don't think those would be on our shopping list at any time soon. Alfonso, do you maybe want to comment on the tourism aspect of it?

Right. Yes. So yes, as Laurence said, Bonaire is the dominant shopping center. Not only a shopping center, it's a retail hub. It is the largest retail hub in the province of Valencia, so it's enough dominance of it already. And it also has already a component of tourism not the way I think you're thinking, Alistair, in terms of cruise services because Valencia has got cruises, but it's not as Barcelona. However, I think that we are already covering that segment of tourism. And the shopping center is serving it very well. But as usual, I mean, we need to serve the community that we are based on and giving our customers what they are requiring.

Then another question from Francois at Anchor Stockbrokers. He asks, can you give an indication of where you expect your LTV to be at FY '25?

The LTV, Francois, should be in the range of 40% to 42%. Obviously, it's very much dependent on where year-end valuations come in, but we expect it to be in that range.

Then a couple of questions from Etienne Roux at Truffle. He says, any comments on expectations for valuations at year-end? And then secondly, are you getting more interest from offshore investors given the bigger Spanish portfolio in the mix?

Sure. Etienne, I think valuations, without giving you a number because obviously, it's too soon. But I think definitely, we've got a strong feel on directionality. In South Africa, we'd expect to see, obviously, positive growth in valuations. And that should approximate at least the growth in NOI. When you sort of look at the in-force escalations, we'd expect to see sort of growth that approximates the NOI. An interesting question, I still don't believe that the value of our solar farm is being fully reflected in our valuations, but certainly upward trajectory in valuations in South Africa. And I think also very fair to say that in Spain, we've reached the bottom of the cycle. So we would expect to see increases in valuations from the Spanish point of view and a Portuguese point of view. Discussions with valuers are indicating that they probably are going to start tightening the IRRs, but they may leave the exit caps constant for the time being until they see further growth. But as we sort of see more interest rate cuts coming through, and I think they will eventuate in Europe, I think that is very positive for valuations overall. And as we've always said, within Castellana, there is embedded value in the portfolio. When you look at the growth in NOI and how we've kept valuations constant to slightly positive over really a rising interest rate cycle, that shows you that when the cycle does turn and rates start coming down, we have got that embedded value in the NOI that should come through quite well. So all in all, positive trajectory in valuations in all of South Africa, Spain and Portugal.

Then another question from Francois. Can you disclose the sensitivity of the FY '26 DPS to the rand-euro exchange rate with reference to currency hedges?

Right. So approximately a ZAR 1 move in the exchange rate would be equal to a 1% increase in the DPS figure. That's off the base of 18.65 that we're talking about.

And then final question from Alistair Anderson at Property Flash. The group has acquired quite a few assets locally and in Iberia recently. Does this mean there is a larger need for disposals? Or is retail quite small now?

Alistair, I think, certainly, there is nothing that is as flashing as an asset that needs to be sold. I think the process we go through is constantly evaluating the portfolio, looking for opportunities to win over the portfolio and recycle into other assets. It's something that Vukile has been doing forever in South Africa. And in Spain, if you look at where we are now, we've sold the 2 office assets we have. We sold Mejostilla and have recycled that into other opportunities. So we're always evaluating the portfolio to see if there are opportunities to recycle, sell at a lower yield, buy at a high yield and create value that way. But nothing that is sort of highlighted as an immediate sale in that portfolio. Are there any further questions?

No, that is all of them.

Fantastic. Let me just end off then by again, thanking everybody for your attendance. We really appreciate it, and have a good day further, and we look forward to seeing you at results in mid-June. Take care.